Tokyo stocks tumble on bank woes

Dollar briefly hits 128-yen level

MarikoAndo

TOKYO (CBS.MW) - Tokyo's Nikkei index dropped nearly 2 percent Monday as major banks extended their recent slide on the back of lingering worries over their credit risks.

Stock markets in Seoul and Taipei also fell, but Hong Kong managed to erase early losses to close flat.

Japan's Nikkei Average lost 188.30 points, or 1.8 percent, to close at 10,323.35. The broader TOPIX dropped 1.8 percent to its year's closing low at 988.98. The TOPIX closed below the 1,000 level for the first time since September 26.

Growing fears over prolonged weakness in the Japanese economy prompted investors to sell bank shares. Japan's GDP is likely to fall 0.5 percent in 2002, according to economists' surveyed by the influential Nihon Keizai daily. That compares to the government's own forecast of flat growth next year.

"More investors started moving their money into less-risky sectors on mounting fears over banks' credit risks. It's the market's quiet signal to demand that the government do something quickly to stop prices from falling further... it's a bit scary that some (bank) shares have fallen to this level without major news," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities.

"Given expected sluggishness in Japan's economy, technology shares could also face selling. If so, the Nikkei could break below the 9,000-level in the first half of next year if the U.S. economy fails to show signs of recovery by then."

Pessimism over the outlook for the Japanese economy also weakened the yen. The dollar was trading around 127.87 yen in late afternoon trade, after rising as high as 128.03 yen - it's highest since Oct. 7, 1998. The U.S. currency fetched 127.45 yen in New York late Friday.

Japan's banks are under increasing pressure to clean up their bad loans -- the core problem understood to be blocking the world's second biggest economy from recovery.

Nikko Cordial Group (8603), Japan's third-largest brokerage, sank 6.1 percent to 521 yen. Its asset management arm, Nikko Asset Management, said its president Kazuyoshi Kimura will resign to take the blame for massive cancellations of its money management funds (MMFs) following price plunges. Nikko's MMFs have fallen below their face value following the failure of Enron
ENE, +0.00%
as these MMFs included bonds issued by the troubled power giant.

Seoul, Taiwan fall

In South Korea, the benchmark Kospi dropped 2.5 percent to 648.28. The market's focus was on SK Telecom after the company reportedly said it's abandoning talks to sell a stake to Japan's NTT DoCoMo.

South Korea's SK Group is expected to scrap talks to sell a 14.5 percent stake in its mobile business SK Telecom
SKM, -2.51%
to DoCoMo
NTDMY
due to disagreement over pricing, Reuters reported. SK Telecom's shares tumbled 4.8 percent to 236,500 won.

State-run Korea Telecom
KTC, +2.71%
erased earlier losses to close up 2.1 percent at 51,000 won. The South Korean government will sell a 3.2 percent stake in Korea Telecom to Microsoft
MSFT, -1.70%
the Yonhap News Agency reported.

The government is currently in the process of selling its stake in KT with the aim of privatizing it next year. Korea Telecom officials were not immediately available for comment.

Technology shares were under pressure in Taiwan, where the key Weighted Index fell 0.6 percent to close at 5,456.15 points.

Market players were tentative following recent rallies that have seen the key index gain 24 percent this month after election results raised hopes for more stability in the island's economy and politics.

Hong Kong flat

Hong Kong's Hang Seng Index ended quiet session unchanged at 11,465.78 points. The index has been one of the region's worst performers, having fallen over 24 percent so far this year.

Market heavyweight Hutchison
HUWHY
(0013) saw its shares jump 1 percent to HK$74.75. JP Morgan has reportedly said that Hutchison was among its featured telcos in Asia for 2002, making it one of its top stock picks for next year.

Australia, New Zealand stocks move little

Australia's All Ordinaries Index closed virtually steady at 3,236 points, or down only 0.05 percent.

But shares of Normandy Mining
NMDMF
jumped 2.8 percent to A$1.81, after having risen as high as A$1.82 - a level not seen since June 1998. The Australian gold producer last Friday recommended that shareholders reject a A$3.91 billion scrip and cash takeover offer by AngloGold
AU, -0.10%
giving favor to a rival bid by Newmont Mining
NEM, -0.22%

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